On December 10, 2020, the CFPB issued two final rules relating to the qualified mortgage (QM) definition under the Truth in Lending Act and its implementing Regulation Z, referred to as the General QM Final Rule and the Seasoned QM Final Rule. The effective date of both the General QM Final Rule and the Seasoned QM Final Rule was March 1, 2021, and the CFPB also established a mandatory compliance date for the General QM Final Rule of July 1, 2021.
Another category of QMs currently available under Regulation Z, referred to as the Temporary GSE QM loan definition, consists of loans that are eligible for purchase or guarantee by either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (collectively, the GSEs), while operating under the conservatorship or receivership of the Federal Housing Finance Agency (FHFA). Pursuant to a final rule issued on October 20, 2020, the Temporary GSE QM loan definition is scheduled to expire on (1) the mandatory compliance date of the General QM Final Rule or (2) with respect to each GSE when that GSE ceases to operate under the conservatorship of FHFA, whichever happens earlier.
On April 27, 2021, the CFPB issued a final rule extending the mandatory compliance date of the General QM Final Rule from July 1, 2021, to October 1, 2022. While the April 2021 Final Rule extends the General QM Final Rule’s mandatory compliance date, it does not change the General QM Final Rule’s effective date.
As previously noted, the General QM Final Rule was effective on March 1, 2021. For applications received on or after March 1, 2021, but before the mandatory compliance date of October 1, 2022, creditors that seek to originate General QM loans have the option of complying with either the revised, price-based General QM loan definition or the original, total monthly debt to total monthly income (DTI)-based General QM loan definition. Only the revised, price-based General QM loan definition is available for applications received on or after the October 1, 2022, mandatory compliance date.
Additionally, the April 2021 Final Rule affects the expiration of the Temporary GSE QM loan definition or “Patch.” Under the April 2021 Final Rule, the Temporary GSE QM loan definition will expire on October 1, 2022, or the date the applicable GSE exits conservatorship, whichever comes first. However, the practical availability of the Temporary GSE QM loan definition may be affected by policies or agreements created by parties other than the CFPB, such as the Preferred Stock Purchase Agreements (PSPAs), which include restrictions on GSE purchases that rely on the Temporary GSE QM loan definition after July 1, 2021.
The CFPB is also considering whether to initiate a rulemaking to revisit the Seasoned QM Final Rule. If the CFPB decides to do so, it expects that it will consider in that rulemaking whether any potential final rule revoking or amending the Seasoned QM Final Rule should affect covered transactions for which an application was received during the period from March 1, 2021, until the effective date of such a final rule.
The CFPB has released additional resources regarding the Ability-to-Repay (ATR)/QM Rule, which includes an executive summary of the Final General QM and Seasoned QM Rules, updated charts and an updated small entity compliance guide.
These resources are available at the following link:
https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/ability-repay-qualified-mortgage-rule/
Another category of QMs currently available under Regulation Z, referred to as the Temporary GSE QM loan definition, consists of loans that are eligible for purchase or guarantee by either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (collectively, the GSEs), while operating under the conservatorship or receivership of the Federal Housing Finance Agency (FHFA). Pursuant to a final rule issued on October 20, 2020, the Temporary GSE QM loan definition is scheduled to expire on (1) the mandatory compliance date of the General QM Final Rule or (2) with respect to each GSE when that GSE ceases to operate under the conservatorship of FHFA, whichever happens earlier.
On April 27, 2021, the CFPB issued a final rule extending the mandatory compliance date of the General QM Final Rule from July 1, 2021, to October 1, 2022. While the April 2021 Final Rule extends the General QM Final Rule’s mandatory compliance date, it does not change the General QM Final Rule’s effective date.
As previously noted, the General QM Final Rule was effective on March 1, 2021. For applications received on or after March 1, 2021, but before the mandatory compliance date of October 1, 2022, creditors that seek to originate General QM loans have the option of complying with either the revised, price-based General QM loan definition or the original, total monthly debt to total monthly income (DTI)-based General QM loan definition. Only the revised, price-based General QM loan definition is available for applications received on or after the October 1, 2022, mandatory compliance date.
Additionally, the April 2021 Final Rule affects the expiration of the Temporary GSE QM loan definition or “Patch.” Under the April 2021 Final Rule, the Temporary GSE QM loan definition will expire on October 1, 2022, or the date the applicable GSE exits conservatorship, whichever comes first. However, the practical availability of the Temporary GSE QM loan definition may be affected by policies or agreements created by parties other than the CFPB, such as the Preferred Stock Purchase Agreements (PSPAs), which include restrictions on GSE purchases that rely on the Temporary GSE QM loan definition after July 1, 2021.
The CFPB is also considering whether to initiate a rulemaking to revisit the Seasoned QM Final Rule. If the CFPB decides to do so, it expects that it will consider in that rulemaking whether any potential final rule revoking or amending the Seasoned QM Final Rule should affect covered transactions for which an application was received during the period from March 1, 2021, until the effective date of such a final rule.
The CFPB has released additional resources regarding the Ability-to-Repay (ATR)/QM Rule, which includes an executive summary of the Final General QM and Seasoned QM Rules, updated charts and an updated small entity compliance guide.
These resources are available at the following link:
https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/ability-repay-qualified-mortgage-rule/
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